Deal Radar 2008: PlayFirst Plays Casual Games Well

PlayFirst is a leading publisher of casual computer games. Based out of San Francisco, it is focused on creating shared casual game experiences around “lasting original brands” with emphasis on “rich story and character”. Few of the more popular PlayFirst titles include the Diner Dash series, Wedding Dash, Chocolatier and Dream Chronicles. My interview with their CEO John Welch is here.

The company received its first round of venture funding of $5 million in 2004 from Trinity Ventures and Mayfield Fund. Another $5 million came in January 2006 from Rustic canyon along with the previous investors. Recently in December ’07 it received its series C funding of $16.5 million led DCM Doll Capital and the existing investors.

The company did $9.7 Million in 2007 revenues (compared to $4.8 Million in 2006, and $1.3 Million in 2005). “We flirted with profitability some months, but that’s not an immediate priority as we still seek to grow potentially ahead of revenue,” says CEO John Welch.

With the casual gaming industry expected to grow at over 35% CAGR, PlayFirst should continue to grow smoothly over the next few years. DFC Intelligence forecasts the casual gaming industry to reach $13 billion by 2011.

As per Quantcast the website finds around 484,000 unique visitors per month in the US alone and commands a rank of 5922. Most of its purchasers are females over 35 years of age. PlayFirst also syndicates its games through many other portals, including Yahoo!. “Diner Dash: Hometown Hero was a significant release in bringing multiplayer and micro-transactions to the previously single-player North American internet premium casual game market. I’d encourage you to check it out at www.DinerDash.com.”

In December 2007, PlayFirst struck a deal with RockYou Publisher Network to distribute casual gaming through social networking sites beginning with Facebook, which means access to a wider and younger section of the population.

Viacom, which is aggressively looking to invest in the online gaming industry, might be interested in acquiring PlayFirst. So also would Walt Disney.

By looking at the Company’s revenue growth history, let’s assume 2X growth in 2008, over 2007. By applying this, 2008 revenue could work out to be around $20 Million. Taking a revenue multiple of 6-10 (given its promised growth potential) we get a valuation of around $120-$200 Million for the company.

Of course, there’s absolutely no need to sell this company in 2008, even if bidders start lining up. With a $13 Billion TAM, this is certainly a company to build. If anything, it can become the trunk for rolling up other smaller producers to beef up its portfolio.

In that sense, PlayFirst is on my Deal Radar in the same capacity as Kayak, which we discussed earlier.

This segment is a part in the series : Deal Radar 2008